Finance ministry recommendation overlooked
A Finance Ministry recommendation not to award the same player more than two airports, out of a total of six to be privatised by the Centre, was among some of the key suggestions brushed aside by the government panel for public private partnerships — the PPP Appraisal Committee (PPPAC) — effectively leading to Adani Enterprises Limited emerging as the winning bidder for all airports.
Following the Union Cabinet’s in-principle nod in November 2018 to privatise six airports owned by the Airports Authority of India (AAI), the PPPAC met on December 11 to recommend the proposal for final approval.
The panel dismissed key suggestions made by the Finance Ministry’s Department of Economic Affairs (DEA) and the NITI Aayog to improve criteria for selecting bidders.
These included the requirement of prior experience in operation and management (O&M) as well as providing the total project cost up front for each of the airports, to better determine the financial capability of interested players.
Three days later, on December 14, the AAI floated a tender for operation, management and development under the PPP mode for the Lucknow, Ahmedabad, Jaipur, Guwahati, Thiruvananthapuram and Mangaluru airports.
In February 2019, the AAI declared Adani Enterprises Limited the highest bidder for all six airports. On July 3, the Union Cabinet gave its nod for leasing three of these airports, while “a decision on the remaining three is awaited.”
Logic behind guidelines
The DEA and NITI Aayog’s detailed notes of the proposal on the six airports were circulated among the participating ministries ahead of the PPPAC meeting.
In its note, the DEA noted unequivocally, “the six airport projects are highly capital intensive projects, hence it is suggested to incorporate the clause that no more than two Airports will be awarded to the same bidder duly factoring the high financial risk and performance issues. Awarding them to different companies would also facilitate yardstick competition.
To buttress its point, the DEA cited that though GMR was the only qualified bidder for Delhi and Mumbai, both the airports were not given to the same company.
In a separate note, the NITI Aayog highlighted the need to have players with prior Operation and Management (O&M) experience. It referred to the Model Request for Qualification (RfQ) that requires an applicant without O&M experience to either tie-up with an entity or engage qualified personnel with the requisite experience.